Does anyone remember the good old days when we could go an entire news segment without hearing the word “inflation” a single time?
Probably not since before that other time you couldn’t go a single segment without hearing the word “Covid” at least a hundred times. So apparently, thanks to some virus (which still today don't really know where came from), inflation hit us like a ton of bricks, and our economy has been in the damper ever since.
Can we just kick inflation to the curb already?
“Damper” is a cute word to describe an economic disaster that’s dragged on for way too long and has tolled the lives of many in the United States. But on the bright side, unlike ‘The Great Inflation’ days dating back to the ‘60s, this time, the Federal Reserve strapped in to fight off inflation. The goal? To bring down the peak inflation rate that reached 9.4% in June 2022. How do they do it? In short, when inflation is too high, the Fed will usually raise interest rates as a way of telling the economy to chill out.
Three cheers for the Fed! They’ve KO’d inflation round after round over the last year, bringing the consumer price index (CPI) down to 3.0% this month. You remember that other number we were at just a year ago, right? You must admit, they’ve been doing a pretty impressive job of getting our economy out of the gutter.
The economy is feeling much better, but why isn’t your pocket?
Inflation is starting to ease, but don’t expect interest rate relief just yet. Since the Fed needs to up the rates to have the upper hand on that CPI number, we simpletons feel the wrath of the mighty interest rates in just about everything we do. Now we’re paying more on credit cards, loans, mortgages, and other types of variable-rate debt. But the Federal Reserve is adamant about winning, and hey, we like a winning attitude. Could you just throw us a bone along the way? Please, thanks, xoxo.
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What do the finance peeps have to say?
Economists and financial market traders are saying we’re pretty much smooth sailing, and some even predict we’ll be out of this mess by the end of the year with a full extinction on inflation and rate hikes and all that (not so) good stuff.
If any of us are convinced by the economist graph guys, then Jerome Powell has come to quickly sway our optimism in the other direction. He’s leaving no room to the imagination as to what will happen in the upcoming Fed decision. According to him and other central bank officials, we all better buckle in, because more tightening is coming.
We do not want to rush ahead and say the fight against inflation has been won, as we have seen head-fakes in the past
"For the Fed, despite the soft CPI print, we still anticipate a hike in July ... (and) while we hope the softness in inflation persists, it is unwise from a policymaking standpoint to bank on that," said Jan Nevruzi, U.S. rates strategist at NatWest Markets."We do not want to rush ahead and say the fight against inflation has been won, as we have seen head-fakes in the past."
Unfortunately, we are going to need to hear the word "inflation" at least one more time on the news. The report will come through next Wednesday, June 26th, during the Fed meeting in DC. Until then, it's a great time to place your (high-interest) bets. So, what do you think it will be? Another hike that may hurt now but could save the economy later? No hike at all and a risk of inflation rising again in the future? Free ice cream stand outside the Board Room in Washington, D.C.?
Let's be honest. We're all in it for the free ice cream anyway.